The Dynamics of Mergers and Acquisitions in Oligopolistic Industries

48 Pages Posted: 5 Mar 2008 Last revised: 15 Feb 2012

See all articles by Jianjun Miao

Jianjun Miao

Boston University - Department of Economics

Dirk Hackbarth

Boston University - Questrom School of Business; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: November 30, 2011

Abstract

This article embeds an oligopolistic industry structure in a real options framework in which synergy gains of horizontal mergers arise endogenously and vary stochastically over time. We find that (i) mergers are more likely in more concentrated industries; (ii) mergers are more likely in industries that are more exposed to industrywide shocks; (iii) returns to merger and rival firms arising from restructuring are higher in more concentrated industries; (iv) increased industry competition delays the timing of mergers; (v) in sufficiently concentrated industries, bidder competition induces a bid premium that declines with product market competition; and (vi) mergers are more likely and yield larger returns in industries with higher dispersion in firm size.

Keywords: anticompetitive effect, industry structure, real options, takeovers

JEL Classification: G13, G14, G31, G34

Suggested Citation

Miao, Jianjun and Hackbarth, Dirk, The Dynamics of Mergers and Acquisitions in Oligopolistic Industries (November 30, 2011). Journal of Economic Dynamics and Control, Forthcoming, EFA 2007 Ljubljana Meetings Paper, Available at SSRN: https://ssrn.com/abstract=968870 or http://dx.doi.org/10.2139/ssrn.968870

Jianjun Miao (Contact Author)

Boston University - Department of Economics ( email )

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United States
617-353-6675 (Phone)

HOME PAGE: http://people.bu.edu/miaoj

Dirk Hackbarth

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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